Ansoff Matrix

• What is the Ansoff Matrix?

  A marketing planning model that helps a business determine its product and market strategy
• In the Ansoff Matrix, the further you get away from market penetration the greater risk of the decision
• Which strategy in the Ansoff's Matrix involves the greatest risk?

  Diversification
• What is the term where a business sells existing products to existing markets?

  Market penetration
• What is the term where a business sells new products to existing markets?

  Product development
• What is the term where a business sells existing products to new markets?

  Market development
• What is the term where a business sells new products to new markets?

  Diversification
• The Ansoff Matrix is about assessing the risk of each choice instead of a model that makes the business pick one strategy
• What is market penetration?

  A growth strategy where a business aims to sell existing products into existing markets
• What is the aim of market penetration?

  Increase market share
• How can a business achieve market penetration?

  • Increase promotion - more sales
  • Decrease prices
  • Increase and effective distribution (e.g. open new stores)
• Market penetration involves getting existing customers to buy more
• What is the least risky strategy on the Ansoff Matrix?

  Market penetration
• Market penetration will only work if what is there?

  Demand
• When a business uses market penetration the business focuses on markets and products it knows well meaning there is less investment in research and development and market research
• If a business uses market penetration the business already knows its competitors and what customers want
• Market penetration is unlikely to need significant new market research
• The problem with market penetration is that the market might not be growing fast enough to meet the growth objectives for a business
• Market penetration is trying to increase the usage by existing customer possibly be introducing loyalty schemes
• An example of market penetration would be Tesco’s Club card which gives discounts to loyal customers
• A weakness of market penetration is that businesses may have limited scope for increasing sales as they are already selling at full capacity
• A disadvantage of market penetration is that if the market isn't growing then sales will eventually start to fall as the market becomes saturated
• What is product developement?

  A growth strategy where a business aims to introduce new products into existing markets
• Product development may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets
• Product development may require the development of new what?

  Competencies
• A strategy of product development is particularly suitable for a business where the product needs to be differentiated in order to remain competitive
• Successful product development places emphasise in marketing on what?

  • Research and development
  • Successful innovation
  • Detailed insights into customer needs and how they might change (market research)
  • Being first to market
• What is market development?

  A growth strategy where the business seeks to sell its existing products into new markets
• What are different approachs to market development?

  • New geographical markets e.g. exporting to emerging markets
  • New distribution channels e.g. using e-commerce
  • Different pricing policies to attract new customers in different segments
• Market development can be useful for a business where existing markets are saturated or in decline
• Market development is usually more risky than product development particuarly if expansion into international markets
• Market development can not be useful when existing products may not suite new markets which depends on the customer needs
• What is diversification?

  A growth strategy where a business markets new products in new markets
• Diversification is an inherently more risky strategy because the business is moving into new markets in which it has little or no experience
• If diversification is successful, overall risk of the business is spread so if demand falls in one market, it has another where its selling
• What are the disadvantages of using diversification as a strategy?

  • Increasing costs and complexity
  • Facing more competition
  • Risk of failing to meet customer expectations
• What are the benefits of using diversification as a strategy?

  • Reduces risk if successful as investments are spread across multiple markets
  • Increase the business' overall market share